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A FAST Method for Nested Estimation

Author

Listed:
  • Guo Liang

    (Institute of Statistics and Big Data, Renmin University of China, Beijing 100872, China)

  • Kun Zhang

    (Institute of Statistics and Big Data, Renmin University of China, Beijing 100872, China)

  • Jun Luo

    (Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200240, China)

Abstract

Nested estimation involves estimating an expectation of a function of a conditional expectation and has many important applications in operations research and machine learning. Nested simulation is a classic approach to this estimation, and the convergence rate of the mean squared error (MSE) of nested simulation estimators is only of order Γ − 2 / 3 , where Γ is the simulation budget. To accelerate the convergence, in this paper, we establish a jackkniFe-bAsed neSted simulaTion (FAST) method for nested estimation, and a unified theoretical analysis for general functions in the nested estimation shows that the MSE of the proposed method converges at the faster rate of Γ − 4 / 5 or even Γ − 6 / 7 . We also provide an efficient algorithm that ensures the estimator’s MSE decays at its optimal rate in practice. In numerical experiments, we apply the proposed estimator in portfolio risk measurement and Bayesian experimental design in operations research and machine learning areas, respectively, and numerical results are consistent with the theory presented.

Suggested Citation

  • Guo Liang & Kun Zhang & Jun Luo, 2024. "A FAST Method for Nested Estimation," INFORMS Journal on Computing, INFORMS, vol. 36(6), pages 1481-1500, December.
    • Handle: RePEc:inm:orijoc:v:36:y:2024:i:6:p:1481-1500
    DOI: 10.1287/ijoc.2023.0118
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    References listed on IDEAS

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